Australian Dollar:
The Australian dollar held onto gains won through Friday and Monday trade and opens this morning relatively unchanged buying 0.7136 U.S. Cents. The AUD edged lower through domestic trade touching session lows of 0.7103 after the RBA minutes proffered a dovish outlook, suggesting growth was below average and international developments have increased the risk of a deeper slowdown. The suggestion of sub-par growth advocates further policy easing which could weigh heavily on the Aussie dollar should the Fed choose to raise the benchmark cash rate or offer a clear path toward policy adjustments. The dollar found support on moves below 0.71 buoyed by advances in emerging market currencies as investors continue to weigh up the likelihood of a Fed policy adjustment. We expect the AUD will maintain current ranges drifting sideways prior to the FOMC press conference and policy announcement early Friday morning.
We expect a range today of 0.7010 – 0.7190
New Zealand Dollar:
The New Zealand dollar edged higher through trade on Tuesday with supports forming this week above 0.63. An increase in the Global Dairy Trade Index leant support to the Kiwi pushing through 0.6350 to touch intraday highs of 0.6368. Upside potential however remains capped as investors keep one eye on the Fed’s upcoming policy announcement wherein a hawkish outlook will likely prompt a break lower. Attentions today turn to current account balances ahead of quarterly GDP numbers tomorrow.
We expect a range today of 0.6290 – 0.6420
Great British Pound:
The Great British Pound succumb to downward pressure through Tuesday breaking below 1.5350 after a softer than anticipated inflation print waylaid expectations of an earlier than expected BoE rate adjustment. Annual CPI data released by the Office for National Statistics showed price pressures remained neutral with no increase in inflation in the 12 months to August 2014. Soft inflationary data is the central argument against policy adjustments and will likely continue to overshadow improving labour market data. Until there is a flow on from increases in wages and improved labour conditions it is unlikely the BoE will be in a hurry to amend the current policy stance especially given the present concerns surround Chinese and global growth prospects. Attentions today turn to average hourly earnings and unemployment claims for domestic direction.
We expect a range today of 2.1150 – 2.1700
Majors:
The U.S dollar bounced off near three week lows through trade on Tuesday buoyed by a rally in equities on Wall St and a stable Retails Sales print that left the door open for a possible monetary policy adjustment. The question is will the Fed pull the trigger and increase interest rates for the first time in 9 years. A mixed macroeconomic data set Tuesday saw Industrial Production, New York Manufacturing and Capacity Utilisation all fall short of market expectations throughout August. Hardly a ringing endorsement for a policy change. Interest rate futures suggest there is still a 25% chance the Fed will bite the bullet tomorrow and the Greenback rallied back through 120 JPY having suffered early selling after the BoJ left its own monetary policy strategy unchanged, electing not to increase stimulus measures. The Yen has been the primary benefactor of the recent flight to haven assets and as tensions ease the expectations of additional monetary stimulus to offset continued weak data will likely weigh on further JPY advances. Attentions today turn to European and US CPI numbers for macroeconomic direction.
Data releases:
AUD: RBA Assist Governor Debelle Speaks and MI Leading Index
NZD: GDT Price Index and Current Account Balance
JPY: BoJ Monthly Report
GBP: Average Earnings Index, Claimant Count Change, Unemployment Rate and 10 Year Bond Auction.
EUR: Final CPI y/y, Final Core CPI y/y and 30 Year German Bond Auction
USD: CPI m/m, Core CPI m/m, NAHB Housing Market Index, Crude Oil Inventories and FOMC Policy Meeting Commences.